Power Grid Corporation of India Limited (POWERGRID) Earnings Call Transcript & Summary

Thank you, Rahul. Very good afternoon to all the participants. Thank you so much for taking time to be a part of this webinar on our fourth quarter and annual results. I would like to show a presentation. How do I -- I'm not getting the shared content facility. Yes, all right, all right. Thank you. It's visible?

Yes Sir.

Yes Sir, please go ahead.

Thank you. Recall the highlights, our current portfolio, project execution, asset management highlights, financial highlights, business outlook and a little bit about the impact of COVID. Year '19/'20 highlights, we are proud to again be recognized as a Maharatna, and we've got a new logo. Several projects we have been able to complete, particularly the Champa-Kurukshetra project and the entire Green Energy Corridors, including the REMCs. Our Southern Interconnector, TBCB, project has also been commissioned, operated in this year. We have met the CapEx and capitalization guidance, which we gave at the beginning of the year. And we got new asset orders for INR 13,400 crores. As on date, Power Grid has 1,63,222 circuit kilometers of transmission lines; over 1,260 lines with more than 92% at 400 kV plants; 248 substations, of which 90% plus are again 400 kV and above; 4,09,000 MVA transformation capacity; interregional capacity is over 87,000 megawatts. Nearly 85% of the total interregional capacity of the country is owned by Power Grid. We are now a constituent of the FTSE 4GOOD Index Series, MSCI Rating A in December [indiscernible] and constituent of the MSCI EM ESG Index as well. The Government of India owns 51.34%, and about 5.4% of our total assets are now in the TBCB portfolio. There are 19 projects, 8 of them are operational and 11 are under construction, 7 the ISTS and 4 are in the intrastate. The operational assets have annual levelized transmission charges of about INR 1,523 crores and another INR 1400 crores is -- are under construction. The overall investment will be of the order of INR 24,000 crores. This year we -- at the beginning of the year, we said the CapEx will be of the order of INR 15,000 crores, and we are glad to report a CapEx of INR 15,313 crores; INR 11,678 crores are on the balance sheet RTM projects and INR 3,635 crores in the TBCB projects. Capitalization has been INR 18,234 crores. Again, we gave a guidance of around [indiscernible] subject to the Raigarh-Pugalur system. And I will just explain the current status of the project. We could not complete it in '19/'20. Around INR 15,303 crores was capitalized on the balance sheet and INR 2,931 crores on the TBCB. This quarter, INR 7,317 crores on a consolidated basis and standalone INR 4,639 crores capitalized. And as I mentioned, the Southern Interconnector System as well as the Champa-Kurukshetra system are fully commissioned in the last quarter. Major projects commissioned include the Champa-Kurukshetra, Madhugiri-Yelhanka, Edamon-Kochi, Ajmer-Bikaner, Bikaner to Moga. These are part of the Green Energy Corridor. Then, there is also the Nabinagar-Patna, Vemagiri-Chilakaluripeta, Chilakaluripeta-Cuddapah system under the TBCB. Overall, we added 4,925 circuit kilometers and 3 substations, 3,810 circuit kilometers in the RTM and 1,115 circuit kilometers under the TBCB. As well as the Raigarh-Pugalur transmission system, you would appreciate that this is one of the longest DC lines and plus/minus 800 kV HVDC system that is being built in the country. The project faced acute problems in Tamil Nadu. And we have been able to overcome all that and commission the line. The line has been discharged. The HVDC terminals, the Bipole-I terminals are ready. We have done the low-power testing, and the high-power testing is commencing very shortly. And there are AC lines, which are required for the evacuation of the first Bipole path of Pugalur to Pugalur and Pugalur to Arasur. Those lines are currently under construction, and we expect to complete them by July. That would facilitate transmission of power over the Bipole-I. And the Bipole-II and the associated lines are expected by December. The terminal stations are 70% to 75% completed, the VSC Terminal for the 2,000 megawatt transmission from Tamil Nadu to Kerala with plus/minus 320 kV HVDC line and the terminal. These are progressing, and we expect to complete them by December '20. On the operations front, this year has been an extremely successful year. We bettered what we did last year. The availability of the system improved from 99.71% to 99.82%. And the trippings have also reduced from 0.46 to 0.39. The NTAMC, or National Transmission Asset Management Center, at Manesar as well as the Regional Transmission Asset Management Centers at all the 5 regions have really helped us under the current lockdown conditions as well as the COVID situation. Nearly 234 substations are under remote operation. We have added another 24 in this current year. And we launched a Transformer Asset Health Indexing Software, which enables us to keep track of the transformers and give signals before any problems occur so that maintenance can be undertaken. Coming to the financial performance. This year, we have been able to achieve on a standalone basis growth of 7.6% in the turnover and 8.8% in the PAT. And on a consolidated basis, the turnover grew by 8.4% and PAT by 10.2%. We are very happy to see a 91% jump in the profits from our TBCB subsidiaries. And on the back of the growth in the profits and keeping in view the funding needs for the CapEx, we are very happy to announce a dividend of 100%, INR 10 on a share of 10. We paid 5.96 per share on -- as interim dividend, which was subject to -- is holding -- I mean DDT. And now we are proposing a final dividend of INR 4.04, where there is no DDTs applicable. Overall, though it is INR 10 per share, I think including the impact of DDT, it will be something around [indiscernible]. I would not like to take much time on this slide. These details are there in the results, and we've now already seen them. Yes, the gross fixed assets on a consolidated basis have grown from INR 2,07,000 crores to INR [indiscernible]. The capital work-in progress is INR 35,933 crores. A marginal increase in debt. Net worth alone from 59,000 to INR 64,695 crores. EPS and book value are there. There is a slight reduction in the debt-to-equity ratio. We have been hovering around 70%:30%, but this is nothing very significant. A slight deleveraging can be seen. Return on net worth is at 17.09, slightly better than the last year. Some of the items, which I've seen the participants in this call are very eager to ask, I thought we should upfront declare them so that the questions can be, to that extent, lesser. Surcharge income for the year, INR 309 crores; incentive, INR 427 crores. That is reflected in the increased availability as well. The interest from subsidiaries has grown to INR 934 crores. This is income as well as cost in the finance segment. Dividend from subsidiaries have significantly gone up. As you have noticed, there has been near doubling of the profits from subsidiaries, and that is reflected in the dividend payout as well. CSR expenses, there has been a significant increase, INR 150 crores. Part of it is due to the requirement to spend 2%. Plus, this year, keeping in view the COVID pandemic, we have donated -- contributed the entire unspent balance, which we are carrying in the reserves, INR 114 crores, towards the PM's CARES Fund. Trade receivables are INR 5,041 crores on a consolidated basis. These numbers, you can see in the -- subsequently when the presentation is uploaded. Slight reduction in the term loans; from INR 4,300 crores at the year-end, we have brought down to INR 3,000 crores. The funding has been through mix of debt and equity. We deployed INR 10,326 crores out of debt and INR 4,682 crores out of internal resources. Biggest -- I mean, one of the impacts of this is average cost of borrowing that has come down from 7.22% to 6.66%. Even the short-term borrowings have significantly come down. Very pleased to inform that last commercial paper we have been able to raise about 3.5% per 60 days. It's very, very [indiscernible] costs have really come down. On the commercial side, I think one of the -- a few years ago -- we have achieved 100% realization. We billed INR 36,881 crores and realized INR 36,882 crores. But for the COVID impacts in the last fortnight, we would have bettered this, and this has been a real phenomenal performance. Compared to where we were at the end of September or even December, the last quarter has seen a significant increase in our realizations due to the concerted efforts from all quarters on this. Outstandings greater than 45 days as on March 31, around INR 2,000 crores. And of course, post the lockdown and the -- no difficulties faced by the SEBs, current position is slightly unsettling. It has increased to INR 5,371 crores, but you are aware that there is the Atmanirbhar Bharat Package, and we expect a significant contribution from this facility. Out of the INR 90,000 crores through REC and PFC, I think we will also get a good chunk to resolve our dues as of 31st March. All the states, Uttar Pradesh,, Telangana, Rajasthan and Jammu & Kashmir, which almost are half of our outstandings, they are going for this package and at an advanced stage of resolution. Coming to our other businesses. Telecom, there has been a marginal increase, 3%. Consultancy has shown flat despite lower orders. I mean this is mainly due to the project execution and the new bids, which we are doing through the TBCB route. We have been able to get a few international orders, 10 new international orders besides the 14 ongoing assignments. We opened our office at Nepal. And cooperation agreement was also signed with Africa50 for a PPP project in Kenya. We have done the system planning and studies and gave them the possibilities for expansion of the network, and we are in discussion with the Kenyan authorities through Africa50. And on the telecom front, yes, despite the farming revenue -- I mean, rates, we have been able to achieve as a part of the growth achieved, and our network is 67,000 kilometers of fibre optic and more than 700 points of presence. Availability of the network is a very strong point, 99.97%, the backbone availability. And we are serving the government and all the critical applications of the government. This business will be shortly handed off into a separate subsidiary. We want the clearance of the NITI Aayog. Under the CERC regulations, we have to seek approval of the CERC, so the petition has been filed cumulative group process. On other businesses, energy management and eV Charging Infrastructure, we have taken up under -- we have taken up under the OpEx route, implementing energy-efficient solutions at IIT Roorkee and also with Kerala and NIT Warangal, we are having discussions. We also want to undertake this through another separate subsidiary. Now coming to the growth going ahead. You are all aware the growth asset is now focused in the power sector. Capacity addition is mostly from the RE. And to integrate this RE, you need significant investment in transmission. And also, we goal set in the NIP, 24x7 clean and affordable power, thermal capacity rise, then RE capacity rise of about 39%, RE consumption of 20%. So these and also the reforms in terms of open access, cost reflective tariffs and so on, there is a significant expectation of investment in the transmission sector, particularly in the intrastate transmission, about INR 1.9 lakh crores are expected. So this will give us an opportunity to expand and grow going forward. As on date, our works in hand are about INR 52,000 crores, of which new projects are INR 6,000 crores, ongoing are INR 34,000 crores, and TBCB are about INR 12,000 crores. We are expecting works for about INR 23,000 crores, INR 24,000 crores to be taken up in the RE, particularly. Currently bids for about INR 16,000 crores under the ISTS are on, 14 projects, and INR 7,400 crores in the intrastate space are on. For the RfPs and RfQs, submissions are in progress. As we've touched upon the impact of the COVID, the lockdown, particularly in the months of April and to a great extent in May, there have been some relaxations. On the operational front, we have, as an essential service, been continuing basically providing the ISTS network. But on the construction side, we have lost a significant portion of the working season. Work has resumed at many locations with the available labor. There are restrictions on interstate movement of men and materials. And even at local locations, at some places, we used to encounter resistance from the people. Then, due to migration of the labor, stringing and erection gangs have depleted. But slowly, the work has picked up, and we are seeing pickup in the available labor as well as some amount of new labor in all our project sites. And we have been able to meet the COVID and the lockdown challenge. We have changed our processes quite significantly, adapted technology. The RTAMCs and NTAMCs have been of great use in this. And we also had -- the benefit of this lockdown was that our O&M teams have developed new processes, more self-reliance in undertaking maintenance activities, use the digital channels to communicate with the OEMs and carry out maintenance themselves. We are taking many measures surrounding our employing safety and welfare to enable the continuity. Work-from-home has been more liberal and is followed. And with reference to our customers, of course, the health has come under a significant strain because of the COVID. We had a double whammy in that the demand has fallen in the lockdown period. And the better paying consumers, the commercial and industrial consumers, had to -- had gone out. And therefore, the revenues had a significant impact. We did not take any coercive measures. We are pursuing with them. And with this Atmanirbhar package, about INR 2,300 crores to INR 2,500 crores we are expecting to be realized from our debtors. And you would also be aware that we have declared a onetime rebate of INR 1,075 crores. This will be in the first quarter of current financial year. And in this period, besides the COVID, we also had to face 2 cyclones, one very severe cyclone, Amphan, upon in the West Bengal and a relatively milder cyclone, Nisarga, in the Western India besides the COVID. So it was really a period of great activity as well as testing our resilience, and I'm very happy to say that both during Amphan and Nisarga, the system had virtually no impact, and the assets of Power Grid are continuing to provide, but for a small tripping, which is highly anything in the Amphan event. So as far as supplies and bidding, our activities are going on, we have enabled payments through digital means as well as against submission of various documents on -- scanned documents are uploading digital means so that our vendors are also having their cash flows on and there is no issue. And I think I'll stop here, and I'll be happy to take any questions you may ask. Thank you.

[Operator Instructions]First question is from the line of Abhishek Puri.

Yes, sir. I have, sir, 2 questions. One, I just wanted to understand the impact of COVID. You said the disruption has been pretty mild. So is there a guidance which is available in terms of commissioning? Have the projects been impacted? And is there some delay or you'll be able to achieve our set-out targets?

Okay. What is the second question?

Second question is on the Rajasthan GEC project. We read that CERC has approved that INR 12,000 crore project for you, but that doesn't form a part of your presentation, so just wanted to understand from you. And thirdly, sir, on InvIT, as I...

[indiscernible]

If I can sneak that in. In -- for InvIT, I think we see that the TBCB projects have a 0 staff cost and you outsource the contracts to PGCIL on a consultancy basis. So would that structure remain the same once InvIT is done?

Okay. On the COVID issue, see, I mentioned that during the lockdown as well as subsequently, there has been -- the best of the working season, it was impacted April, May. And also, the labor has moved out. So we are expecting at least 3-, 4-month delay in the project execution because most of the projects, the ones which we have been able to commence again have commenced initially with the available labor. We had taken care of the labor, providing them food, stay and all those things. But still the tower erection and stringing gangs have left. So we are trying to bring them back and also put forth the more foundation gangs. And supplies also got disrupted because of the factories being locked down. Everything is now picking up. And if there -- there will be a delay of about 3, 4 months in most of the project commission. But having said that, we are still holding the guidance of around INR 20,000 crores to INR 25,000 crores of capitalization in the current financial year. See, without COVID, we should have got the -- I mean, without COVID and also -- we should have got the Bipole-I by now. Yes. So most of it, we should be getting in this financial year, and we are expecting, as I mentioned, about INR 20,000 crores to INR 25,000 crores of capitalization in the current financial year. Coming to your second question about GEC being approved for Power Grid, there is no such specific approval for Power Grid. The scheme that is approved is regulatory approval. I think we are referring for the renewable energy-related transmission schemes in Rajasthan. Most of those projects will be through TBCB route. Okay. And on the...

Right, sir. The third one on the consultancy...

Yes. Right now, these are -- let me put it this way that the pricing of the accounting for the expenditure is not fully. It is there, but maybe there are some improvement score. But once the InvIT is done, we expect to do the O&M, and then definitely, there will be more accurate or more, I can say, that a defined kind of booking of cost. And we look forward to do the O&M of those assets.

Next question is lined from -- is from the line of Mr. Akhilesh Bhandari from ICICI Prudential Mutual Fund.

Sir, you have mentioned the rebate being offered to the discounts. Any guidance you can give? Because there is also that the fixed charges for the power, which is utilized, that is also deferred and has to be recovered in 3 installments. So what would be that portion? Can you just give some clarity on that?

See, the advisory of the ministry was that fixed charges in respect of unscheduled power will be deferred and recovered, I think, in some installments. And second was the rebate. As far as Power Grid is concerned, there is no fixed charge, and there is no scheduling of power. So we are not impacted by the first limb of it because there is nothing like a scheduling of power, so none of our charges we have deferred. The other point was rebate. So rebate, we have offered a consolidated one-time rebate of INR 1,075 crores. So that is the amount which we have given credit notes to all the DISCOMs and that will be accounted in the first quarter. From the revenue point of point of view, there does not seem to be any other impact.

Okay. Sir, and any -- are there any adjustments which need to be made for the current quarter's PAT to come [indiscernible] there are no major adjustments?

There are no major adjustments. I can only say that in this quarter, we had a INR 425 crores of interest income because of the final tariff orders of BNC, so that is one big item. Then there are 2 other items, which are, again, not to expect it to repeat. One was we went under the Vivad se Vishwas scheme and paid INR 122 crores of tax. And as I mentioned in my remarks, the CSR opening, we had spent about INR 114 crores, which is an expense in the current quarter. So net-net, there are not significant -- there are -- if there are -- there is a plus of INR 425 crores there is also a minus of -- plus 2 items, not very big difference.

Next question is from the line of Mr. Mohit Kumar from IDFC Securities.

Sir, congratulations on good set of numbers. Sir, there is a jump of INR 1,000 crore revenue Q-o-Q. Is there something, which is slightly given the fact that Q-o-Q jump has not -- is not seen in any other quarter. Q1 to Q2, we see the jump is barely anything. But Q3 to Q4, this jump has been happening for the last the 3 -- 2, 3 years. Is there something we are missing on the accounting part?

No, no, no. This is very normal because most of the capitalization, which happens. One is capitalization, and second, the impact of the capitalization in the previous quarters is fully felt in the fourth quarter. Whatever we capitalize in Q3, you get full force of it in Q4. So since capitalization is often back-ended, so you see this. And in this particular quarter, I have not seen any significant change. There is more one-off kind of a thing. And on the contrary, on a year-on-year basis, our revenue is lower by about INR 600 crores because the MAT rates have come down. Of course, the tax also has come down. But the revenue top line is lower by INR 613 crores compared to last year because the MAT rate has come down. Correspondingly, the grossing up of the equity of 15.5% comes down and impacts our revenues.

Okay, sir. Second is coming to the InvIT in which -- is there any time line which you are looking at? In the media, we heard there are 9 assets, which are trying to -- and I believe, right now, we only have 8 operational assets, and 1 will get operationalized soon. And have we commissioned -- commercialized any part of Medinipur-Jeerat in the last quarter? Because the -- I don't think there is any TBCB which got commissioned in the last fiscal year apart from that?

Apart from the?

Sorry. Yes, so which TBCB line got commissioned during last fiscal year?

Southern Interconnector, the Chilakaluripeta-Cuddapah and...

And Vemagiri.

Vemagiri system. That has been fully functional. You are right, the Medinipur-Jeerat is not yet due. It was due in July of the current year. I think it will go behind by a few months. The InvIT, we have proposed 5 assets. Actually, for the InvIT, you need an asset to be operational for more than 1 year. So that is the reason we have 5 TBCB assets. The first application has been filed, and documentation is under process. The approval process is on. So that is where it stands.

And Sir, relating to InvIT, sir, are we going to fund this InvIT through our own balance sheet? Or they will have to rely on their own balance sheet post the formation of InvIT?

No, they will have to. They -- you see, the whole idea is to take out our equity and debt, both. Why we will fund it. No, no, we will not fund.

And the last question, sir, we have roughly 3 or 4 or 5 asset, TBCB assets, which are supposed to get commissioned by December '20 if I am not wrong. So when you're guiding for commissioning of $250 billion, I'm assuming that including the HVDC scheme 1 and scheme 3 plus this 3, 4 TBCB projects. Is there any chance that this -- these 3, 4 TBCB projects may get delayed because of the COVID issue?

This is in fact, before this, there was good progress in the works, particularly the Rajasthan schemes, which were targeted by December '20. With the COVID, there has been some slippage. Post -- I think April 20 -- May onwards, we have been again able to start the foundation works and all. And now the more gangs are coming and by July 15, which we expect much more pickup. And yes, we are trying to do by December, but it is likely that it will be delayed by couple of months.

Next question is from the line of Mr. Girish Achhipalia from Morgan Stanley.

Just from the rebate that you have agreed upon, is this spread across 2 quarters or -- because you just mentioned that you booked all of it in Q1. Despite additional accounting treatment -- has anything been booked into Q4 at all?

No, nothing has been booked in Q4 because we have given it against the bills of April and May.

Okay. Sir, second question in last fiscal year, you mentioned a step-up of certain payouts. Can one assume a 65% kind of number for fiscal '21 in context of the CapEx plan?

Which one, the distribution but...

Yes, dividend payout for fiscal '21, can one assume it would be around 65%?

I don't know, I think it's too early to say. Is this dividend not sufficient?

No. No, it is. I was just trying to see directionally, how do we look at -- because you have a fixed CapEx plan. So the exact number to be decided based on the [indiscernible]?

Yes. It will be a function. [indiscernible]. No, it is definitely a function of the CapEx needs and what kind of resources we have require. If the InvIT goes through, there will be a totally different situation of cash flows, and so I am -- don't want to put a number here. When we were looking at the current payout, it is something like 52%, I think, last year, including the dividend distribution tax. So we factored that removal of DDT, and we have increased marginally the payout and along with the growth in the profit. So we are very happy to announce INR 10 dividend overall. So if there is -- as I always mention, we will try to balance the CapEx and need to pay out. We don't want to keep piling cash. This year, on 31st March, our cash balance was INR 120 crores -- INR 136 crores or so, our own cash. The rest of it is on the customer's cash, but the deposit [ works ]. And we had a tax credit of about INR 3,000 crores. So you can't be more frugal in cash than this.

Sure, sir. Understood the thought process. Just one final bookkeeping question, if I may ask. Could you spell out the incentives that you earned in Q4, incentive income?

Incentive in Q4. Incentive in Q4 is INR 111 crores.

Is it similar Y-o-Y, sir?

Last year, it was INR 105 crores.

Next question is from the line of Subhadip Mitra of JM Financial.

Sir, just wanted to get a sense of what are your -- I must have missed, I think, couple of questions in between, and so please pardon me if this is a repeat. Just wanted to get a sense of what is your capitalization plan for FY '21?

It's about INR 20,000 crores to INR 25,000 crores.

Understood. And beyond that, how are you looking the capitalization panning out? That would probably be in tandem with your CapEx over the last 1 or 2 years?

That's right. It could be -- I mean, we see -- again, it depends on the mix of projects at that time.

Okay. And secondly, there was a slide where you talked about the overall transmission CapEx planned in the country, I think somewhere around 2 lakh crores in some states and about 1 lakh crore from the inter-state. So how are you looking at the intrastate or the state-related CapEx plan progressing? Are you seeing a lot more bids coming up on that front or things are still slow moving?

Relative to the total size of the opportunity, the movement is slow. Recently, MP has come out with a scheme, so I believe it will pick up.

Next question is from the line of Mr. Sumit Kishore from JPMorgan.

My first question is, again, the work in hand of INR 110 billion that you had as of December 2020. What is the number as of March end?

I mentioned is the works in hand are INR 52,000 crores; ongoing projects, INR 34,000 crores; new RTM INR 6,000 crores; TBCB, INR 12,000 crores. That is the volume of work in hand.

Okay. And I think in your opening comments, you mentioned some INR 13,400 crores of new orders that you have got in the last financial year.

That is a -- yes, that's total orders in the financial.

Okay. And offset, how much was TBCB, if you could just...

INR 6,600 crores is TBCB, rest is RTM.

Sure. Again, you gave us a more medium-term outlook on the opportunities that are there. How would you say FY '21 and '22, you would look at new order opportunities in TBCB and RTM?

I'm sure the similar kind of number. This year, we got INR 13,000 crores. We should be having similar volume of work adding to the kitty.

Okay. But there is no significant uptick expected because the whole renewable plan seems to have got pushed back a bit?

No. Overall, renewable plan is there, and there will be work which have to be carried out. But if you ask the year-on-year, what kind of numbers, this is the number I would like to state.

Sure. And also, capitalization target of INR 200 billion to INR 250 billion, how much is now attributable to the balance portion of the HVDC project?

Should be of the order of INR 15,000 crores.

Okay. So INR 15,000 crores out of INR 200 crores - INR 250 crores is HVDC.

Yes.

And finally, on CapEx, the budget was about INR 105 billion of CapEx in FY '21. I mean, despite COVID, that would remain unchanged.

Yes.

So coming back to the earlier question, given your CapEx would fall from INR 153 billion to, say, INR 105 billion, and your operating cash flow would probably be higher, would you consider a higher payout by that logic in this financial year? I know there has been a INR 10.75 billion outgo to [ discoms ], but would that change the way you're thinking about payout?

, No, there's no change in our thinking about the payout. See, INR 1,075 crores rebate will get reflected in our P&L, and everything will come to the --

Yes, because your P&L will get depressed to that extent. Our payout ratio is calculated on that onetime reduction. There would be a slightly lower number, right? Because we're looking at it from a cash flow perspective.

I still get your point. Let us see how we would make to move it. If we give the same amount on a lower base payout ratio [indiscernible] -- if we [ still see ] the payout ratio and apply it on the lower base, the dividend will fall. So I don't think -- this is too early to talk.

Yes, my only point was that instead of looking at payout ratio in FY '21, given this onetime item, we should look at it more from a cash flow perspective.

Okay. I take your point.

Next question is from the line of Mr. Ajinkya Bhat of Macquarie.

Sir, I just have one question regarding the ForEx debt on your books. So if my number is correct, as of FY '19, and you had unhedged ForEx debt of roughly about INR 41,000 crores on your books. So firstly, what is the number now as of end FY '20? And secondly, since this debt is unhedged because under the tariff norms, you are allowed to pass on the extra rupee liabilities. But in current context, we have seen rupee getting depreciated significantly quite fast. And on the other hand, you have had to give this rebate of INR 1,075 crores to discoms. So how -- what is your thinking about managing the cash flows regarding this?

Why are you linking this to rebate? There is not correlation between the 2. No, no, let me be very clear. There is no connection between the 2. Number two, the ForEx debt, the amounts are payable over a very long period. So [ redeem over size ] long-term is immediately going to push up the cost. And we believe that over the horizon of these loans, the rates of interest in any case are coming down with the LIBOR, having almost 0.6 or so. So the rate of interest has gone down on the floating rate portion. So overall, I believe that there will not be a significant impact on the SEBs. And while these kind of spikes happen. If we start hedging it, the cost will be much more than [indiscernible].

Okay. So sir, the only reason why I mentioned rebate was that because you have given this rebate essentially your cash collection in the rest of the year would be lower to the tune of INR 1,075 crores, right? You have issued credit notes to discoms. And INR 1,075 crores in that sense, I mean on your PAT of INR 10,000 crores, INR 11,000 crores for this year, that's a significant amount, which is why I just wanted to know the -- your cash management plan.

There is no connection. That is what I'm saying. If you have [ discerned ] the ERV have no connection. INR 1,075 crores to discoms is annual basis 2.5% or less than 3%. It will be about 2.5% or 3% of our [ turnover ]. On a PAT basis, yes, it is significant. But that is something, which is the need because the discoms are really in trouble. So that was essential. We've, at least have made, or rather, we will continue to make profits in the Q1 despite this rebate. As far as [indiscernible] -- this INR 1,075 crores will be reduction in the profit of Q1.

Yes. Yes.

And definitely, it will be the -- I mean, I can't wish it -- but it has nothing to do with the ERV. ERV is a separately billable item. As and when we pay the foreign currency loan, the exchange variation is recoverable. So there is no -- these 2 are not related. INR 1,075 crores, if we borrow today, as a -- on a short-term basis, commercial paper, we are getting at less than 3.5% for 67 days, 90 days. So that is hardly any interest costs. So cash flow management is not going to be a big challenge because of this rebate.

Next question is from the line of Mr. Bhavin Vithlani from SBI Mutual Fund.

Congratulations for a great set of numbers. I have 2 broad questions. If one takes a slightly near-term view of [indiscernible], if you can help us with what is the quantum of TBCB opportunity that you would see maybe on a interstate and an intrastate basis?

So TBCB opportunity right now, we mentioned that there is a INR 16,000 crores tender, which is on for different projects of the renewable energy. Another INR 7400 crores are on for the intrastate. So that is the immediately available opportunity.

Sure. And any progress when we had spoken about the Ladakh project, which was expected to be given to Power Grid on RTM basis.

No, there has not been much progress. The deliberations are on at various levels in the government. But there is no progress, which we are aware of in terms of we being awarded or such.

And if you could also help us with maybe directionally on the TBCB projects, which are being paid out. Have we seen an increase or a decrease in the competitive intensity? And are the equity IRRs in the project that are coming through, which we have been winning recently, are they more closer to the current return on equity or low in the current ROE side we have?

In the projects, which we won are now almost 1 year old. So very difficult. These were in the [indiscernible] last August [ around that time line ]. Almost a year now. So it was pre COVID, and now it is post COVID. So it is very difficult to guess. When we initially bid out, I mean, gave a fist bid for these projects, we were quite surprised that our bids were -- I mean the competitive [indiscernible] was much higher. And in the reverse auctions, there were significant reduction. But now, we don't know. There is now only a signal stage bidding followed by the reverse auction. So only when the bids for these [ 14 ] packages opened, we will be in a better position to understand what [indiscernible]. A number of players -- the number of players who shown interest, I don't think there is any significant reduction.

And my last question is the Atmanirbhar Bharat spoken by our Honorable Prime Minister.

You are not audible, Bhavin.

Sorry. Am I audible now?

Yes.

Okay. Lastly, on the self-reliant India, the Atmanirbhar Bharat, by our Honorable Prime Minister, we actually see a multiple Chinese equipment suppliers and -- so, if you can help us more on that. Are we now preferring more of domestic suppliers? Or it will be more or less similar lines that we have seen in the past?

We are guided by the PPP [ MI ] guidelines of the government. There are equipment for which we have to procure from the local suppliers. There are 2 types of local suppliers. Suppliers with minimum 50% content than those who don't have one category 1, category 2 and so on. So we comply with that.

Next question is from the line of Ravi Agarwal of UTI Mutual Fund.

Sir, just wanted to understand a couple of things. First is that the Power Grid has been asked to let go the role of Central Translation Utility and set up a new subsidiary. So what is -- can you throw some more light on that? And what is the status of that? And how much time it will take? And what will be the impact on the company, PGCIL?

Yes. I had a slide ready for this you know, right -- for I'll use that. We were a CTU in 1998 and continued after that into [ 2004 ]. Now we have already disclosed to you that the CTU will have to be separated into a wholly owned subsidiary. And thereafter, in about 6 months, it will be transferred to the government as a wholly owned government company. If we look at it, what does the CTU typically do? It is the agency to do coordinated planning of the interstate transmission system. It grants open access and also recommends grant of transmission licenses, then billing and collection and distribution to the licensees. These are the broad functions of the CTU. And these are not commercial-oriented activities. So these are purely statutory or regulatory kind of roles. And therefore, we may not see any impact of this on the commercial -- CTU is not a revenue-generating kind of function. So we don't see any impact. There will be more opportunity in terms of in terms of participation in some of the other businesses or it is a role, which is -- it is a prestigious role, no doubt about it as the Central Transmission Utility. But the revenue-generating activities are not in the purview of CTU. So to that extent, we don't see any significant impact on the top line or bottom.

Sure, sir. And then lastly -- yes. And the last thing is that what was the foreign exchange translation gain or loss? And how was this [ to build tariff structure ] on the unhedged [ foreign currency ] exposure?

Or what the?

What was the translation loss on the foreign currency exposure, the borrowings? And how it has been dealt with?

See, to the extent it is part of the construction projects, it would be capitalized. About INR 2,095 crores has been capitalized as part of the gross book. And INR 742 crores either has been expensed of and regulatory deferral balance has been created. So of the INR 742 crores...

INR 1,050 crores.

No, no, no. INR 2,095 crores has been capitalized as part of the under construction projects into the asset, okay? And INR 742 crores has been recognized as a deferral balance. INR 549 crores is part of finance charges. INR 222 crores is part of other expenses, and the INR 742 crores is part of the net movement in regulatory deferral account balance.

Next question is from the line of Mr. Gopal Nawandhar Of SBI Life.

Sir, I just wanted to have an overall understanding on the CapEx going ahead for next 3 to 4 years. So if you see the -- earlier, our CapEx used to be INR 25,000 crores to INR 28,000 crores. And now in this year, we have fallen to INR 10,000 crores. And so should we assume like this should be the bottom year in terms of CapEx, and then it should settle down at INR 13,000 crores to INR 15,000 crores?

Yes, I think so. See, there has to be a very significant pickup in the transmission scheme, which we expect once the current -- the demand picks up in the power sector, and we have to go beyond 175 to 450 gigawatts of [ earning ] capacity. And again, there will be a strong momentum for increasing the transmission network. But in the next couple of years, I see similar numbers in the CapEx.

Okay. Okay. And what should be our funding cost for TBCB projects and regulated business?

Currently, we are borrowing on the balance sheet so there is no difference.

Okay. So once we transfer these assets to the InvIT, will there be any change in the funding cost because now Power Grid is not [indiscernible].

Then you investors will have to figure out.

Next question is from the line of Mr. Swarnim Maheshwari with Edelweiss.

Congratulations for good set of numbers. Sir, 3 questions specifically. First, did you mention that one of the participants that the total intrastate opportunity is about INR 7,000-odd crores. So can you just name the states? Which are these states?

Madhya Pradesh and Jharkhand.

Okay. Sir, secondly, if I look at it, our receivable days actually works out to be about 30, 35-odd days or slightly lower than that. So are we involved in some sort of a bill discounting over here? And if yes, what is the total bill discounting that we have done in FY '20?

My working says, the average collection days are 51. And we did do a bit of bill discounting. About INR 1,260-odd crores we have done. We have done with UP, Telangana, Rajasthan.

Okay. And so this 51 days is after this INR 1,260 crores of bill discounting, is it?

Yes.

Okay. Got it. Got it. And sir, finally, just on InvIT, maybe still early but right now, our average cost of debt works out to be 6.6%. But once the assets gets transferred to the InvIT platform to the trust, do you think that the -- we will be able to raise debt? And I'm talking about the debt level over here in the similar amount of level, say, 6.6%? Or will it be at least about 100 bps higher?

There -- see the point I'm trying to say, again, there is some kind of gap. We are not going to fund the InvIT with debt, okay? So all the TBCB projects currently have debt provided by the parent. So when we transfer these assets, we will pay cash for the equity as well as the debt deployed in the projects. Otherwise, we will not get -- I mean the monetization exercise will not give us that cash. And once the amounts have been transferred to this -- I mean, the InvIT assets have been transferred, so it is up to that investor to look for his alternative sort of [ sub debt ]. We won't raise debt for them.

Sir, I get your point. Clearly, I agree with that, in fact. But sir, for both investor even, we will be 15% holder in that InvIT. So I just wanted to understand that part only that, of course, PGCIL as a standalone entity will not be funding for those TBCB assets, that I understand. But what I'm trying to understand is that will those assets once the -- under the InvIT platform will those assets be able to raise debt at 6.6% level?

[indiscernible], very unlikely, I don't think so. But the point is the investors in the InvIT, I believe, will look at total cost of capital rather than just as a debt and equity because the [ proceeds ] of the cash flows of the projects will be distributed either as debt or as equity to those. So I think initially, we are looking at the unit holders to subscribe this InvIT for acquiring the assets. Subsequent assets, if the InvIT buys, maybe they will raise -- InvIT may like to raise debt [ after those ] assets.

Due to time constraints, we'll take the last question from the line of Mr. Pulkit Patni from Goldman Sachs.

Sir, in continuation with the previous question, somebody asked about losing the status of Central Transmission Utility. While we understand there is no direct benefit in terms of revenue but we understand that having all the information about what is the planning that is happening in terms of new lines, what of those lines could be given on a nomination basis, what goes under TBCB. Is that not very valuable information, which does have an indirect commercial impact for Power Grid and not having that status will basically put us at a relative disadvantage? That would be my question number one.

Okay. This is a kind of a bogey, I would say, which is -- which has been raised and perhaps which is behind this also. Two deals, we have to understand the whole planning process. The transmission planning is a very transparent and participated [indiscernible]. When you plan for a network, you engage with the states, you engage with all the discoms, and it is done in association with the [ CES ], primarily and the [ CDI ] and the CTU together, they do -- they make a scheme, they take it to the standing committees to discuss it with the constituents, that is each state and other participants -- somebody will please mute? Then after that, the scheme, whatever has been formulated, it is out in the public domain, [ minutes ] are in the public domain. And then the scheme goes to the RPC for a commercial approval, and it goes to the National Transmission Community. They again, review it and give the clearance. And then it [ works ] the previously [indiscernible] committee and now it goes to the [indiscernible]. Whether it will be a TBCB or a regulatory tariff. So all through this journey, it generally takes around at least 6 months, [ about ] 6 months. all through this journey, the schemes are in the public domain. All schemes are going to come up, what is the likely cost, what is the substation capacity, where each line, what capacity from there to where, everything, this is all in the public domain. So anyone who is interested to know what kind of lines are going to come up or what schemes are going to come up has the access to this. It is nothing that the CTU alone has it or the Power Grid because it is the CTU alone has it. And now the policy formulation is also very clear. All lines, all projects have to be done through TBCB, except those which are on emergency are very few. If you look at it, the rate of allocation under the RTM route has significantly come down. So I'm not very sure how being a TBCB gives Power Grid additional inputs or additional information. And mind you, there is not an information as you mentioned in this, that we can really cash in kind of make a -- so that's why I'm not --

Sure, sir, that's very clear. So my second question is, irrespective of whether we get some money from PFC REC for the INR 90,000 crores in the next 8 days. Today, we are on the 22nd of June already. The rebate is still going to come in the first quarter itself?

[ Yes ], that is right.

And I now hand over the call to [ Rahul ] for the closing comments.

Thank you so much, Shri Sreekant for your time and the entire management of Power Grid. We had more questions but due to time constraint, we would close this. Thank you very much. Over to you for any closing comments. Thank you very much.

Thank you so much for all your kind words and support and look forward to your support going forward. And have a good day. Thank you all.